Dow closes 179 points lower as IBM weighs; Fed eyed

"Perhaps it's worries about the legitimacy of the Federal Reserve lifting interest rates and that equity valuations — which have been in full — need to be re-rated," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.

The odds of the Fed raising rates for the first time in about a decade rose dramatically after the October nonfarm payrolls report — released Friday — showed the U.S. economy added 271,000 jobs.

According to the CME Group, the probability of a December rate hike rose from about 58 percent to about 70 percent.

U.S. stocks opened lower and soon proceeded to extend losses, with the Dow Jones industrial average falling as much as 242.55 points at its session lows before paring gains slightly ahead of the close.

"I think there was some bargain hunting this afternoon," said Kim Forrest, senior equity analyst at Fort Pitt Capital.

The blue chips index also fell back into negative territory for the year as IBM (IBM) contributed most of the losses.

The S&P 500 closed down nearly 1 percent lower as consumer discretionary and energy both fell over 1 percent.

"The market giving back here is a reflection of weak growth," said Nick Raich, CEO of The Earnings Scout.

Overnight, China said October exports fell 6.9 percent from a year ago, while imports dropped 18.8 percent, both missing expectations.

"Concerns over global growth and the OECD triggered [the move lower] this morning," said Kate Warne, investment strategist at Edward Jones. "I think you're seeing investors position their portfolios with less risk."

The major indexes posted a six-week winning streak on Friday, gaining at least 1 percent.

"We're coming off a very good week and the narrative has certainly changed in terms of monetary policy," said Art Hogan, chief market strategist at Wunderlich Securities. "We've been too low for too long, and I think the path toward normalization starts in December."

"In short, this is a perfectly normal/healthy pullback," said Adam Sarhan, CEO of Sarhan Capital. "We were long overdue."

"The key going forward is going to be analyzing the pullback."

The jobs report also sent U.S. Treasury yields and the dollar surging.

"The market is going to focus on a number of factors [including] the narrowing of the yield curve, which suggests the Fed is gearing up for a rate hike," said Peter Cardillo, chief market economist at Rockwell Global Capital.

In Asia, equities in China and Japan rose their highest levels in over two months.

In corporate news, Plum Creek Timber, Dish Network and Hertz Global reported earnings before the bell. SunEdison (SUNE), Lions Gate (LGF) and Rackspace (RAX) are all due after the bell.

DuPont (DD) named Edward Breen as its permanent chairman and chief executive officer.

L Brands (LB) was downgraded to "neutral" from "overweight" at JPMorgan Chase, based in part on unfavorable apparel industry trends.

The Dow Jones industrial average (Dow Jones Global Indexes: .DJI) closed down 179.85 points, or 1 percent, at 17,730.4, led lower by Caterpillar (CAT) with DuPont and Walt Disney (DIS) the only advancers.

The S&P 500(^GSPC) closed 20.62 points lower, or 0.98 percent, at 2,078.58, with energy leading nine sectors lower and utilities the only advancer.

The Nasdaq (^IXIC) closed down 51.82 points, or 1.01 percent, at 5,095.3.

Decliners led advancers 4 to 1 at the New York Stock Exchange, with an exchange volume of 969.1 million and a composite volume of 3.840 billion at the close.

The CBOE Volatility Index (VIX) (^VIX), widely considered the best gauge of fear in the market, traded above 16.